Q3 2021 Travelzoo Earnings Call

Hello, everyone and welcome to the travel group third quarter 2021 financial results Conference call. All participants have been placed in a listen only mode and the floor will be opened for questions. Following the presentation.

Today's call is being recorded the company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts constitute forward looking statements and are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of NIE.

95 actual results could vary materially from those contained in the forward looking statements.

Cause that could cause actual results to differ materially from those in the forward looking statements are described in the company's Form 10-K, and 10-Q and other periodic filings with the S. E C.

As required by law the company undertakes no obligation to update publicly any forward looking statements whether as a result of new information future events or otherwise please refer to the company's website for important information, including the Companys earnings press release issued earlier this morning.

An archived recording of this conference call will be made available on the travel Xu Investor Relations website at travel sued dot com.

I R. Now, it's my pleasure to turn the floor over to travels as global CEO Hogarth Bartel and its chief Accounting Officer, Lisa Susie Lisa will start with an overview of the third quarter 2021 financial results.

Thank you operator.

And welcome to those of you joining us today.

Please open the management presentation to follow along with our prepared remarks.

The presentation in PDF format is available on our Investor Relations website at travel to Dot Com Slash I R.

Let's begin with slide number three.

Here you can see that our Q3 revenue was $15 7 million.

Up 14% from 13.8 million year over year.

Our operating loss in Q3 was 261000.

Due to our revenue would be negatively impacted by press coverage about the Delta variant in North America.

We believe that this will be a short term effect as the news has become more positive in recent days worldwide, especially around travel restrictions being lifted for Europe and North America.

We had a slight decline in members from $31 3 million at the end of June down to $30 7 million at the end of September.

On slide four we go into more details about our two more significant business segments, North America and Europe.

We are showing the revenue and operating income for the last three years for Q3.

Both of these segments had significant revenue decline in 'twenty 'twenty, but have now recovered.

In Q3 revenue from Europe grew faster.

This had a positive impact on Europe segment operating income.

Our North America business segment is at 63% of the 2019 levels.

And the operating income is close to breakeven.

Our Europe business segment was slower to recover and is at 62% of 2019 revenues, but has closed the gap on the operating income.

Which now with six.

600000 is almost equal to 2019.

Yeah.

On slide five we provide information on non-GAAP operating profit as we believe it better explains how travel to evaluate performance.

This slide shows the non-GAAP operating profit, which is slightly lower at $1.1 million for Q3, 2021 compared to $1 2 million for Q3 'twenty 'twenty.

Slide six provides details on the items that are excluded in the calculation of non-GAAP operating profit.

Please turn to slide seven.

As of September 30, 2021 consolidated cash cash equivalents and restricted cash were $66 4 million.

The cash balance reached expected level as more vouchers were used by travel team members and merchant payables decreased.

An additional factor was deposits related to the switch to a more efficient payment processor.

Slides eight and nine that detail our revenues by business segment.

When utilizing FX changes.

The North America business segment recorded an increase in revenue of 6%.

Year over year and the Europe is this segment recorded an increase in revenue of 37% year over year.

Compared to the prior year period, both revenue types travel and local have picked up as advertisers and partners have started coming back to make use of our beach.

On Slide 10, you can see that the quick adjustment of our cost structure right at the beginning of the pandemic in 2020.

Has resulted in an ongoing lower fixed costs.

And improves the organization's efficiency.

As our operating expense consists of mostly fixed costs, we expect profits to increase if revenues continue to increase.

In summary, as you can see on slide 11, Q3 had lower revenues than anticipated due to the Delta variant in North America.

Europe's revenue trended positively.

However, due to lower fixed costs the company only recorded a small operating loss.

Looking ahead, we currently expect to achieve profitability in Q4.

We continue to see a trend of recovery of our revenue.

However, there could be unexpected fluctuations in the short term.

Now Holger will provide additional information and insights.

Thank you Lisa So, let's turn to slide 12, we have more than 30 million members $6 8 million mobile App users and 4 million social media followers.

So travel is loved by travel enthusiasts.

And even more our members they are affluent there.

And they are open to new experiences.

You see in the U S. 71% of members see that travels through influenza step travel destinations because they trust travelers who went that element of trust is really up to us.

Slide 14 gives you an overview of what we are focused on.

We wanted to see if the exceptional opportunity for providing our 30 million members with exclusive and irresistible offers in the area of travel entertainment and local offers and experiences.

We wanted to accelerate the growth of our member base in 2022.

And to grow check flight club profitable subscription revenue.

And we also want to grow profitability over the next year S demands for travel returns.

Back to the operator.

Thank you.

The floor is now open for questions. If you have a question. Please press the star followed by the one on your Touchtone telephone.

At this time once again, if you'd like to ask a question, ladies and gentlemen that is star followed by one on your Touchtone telephone. Please hold while we poll for questions.

Our first question comes from Michael Kaplinsky with Noble capital. Your line is open.

Thank you and thanks for taking my questions. I was wondering if you can give us a sense of how business trended in North America like throughout the quarter did you see travel kind of started picking up towards the end of the quarter as the delta various kind of subsided in some markets or kind of give us a sense there and then in your.

Europe since it grew faster what was the difference because there were still a lot of companies are countries that had no fight restrictions and so forth. So I'm just curious why Europe kind of saw a better growth rate than the North America.

Yes, Hi, Michael so.

In fact in Q3 the situation in North America, and Europe was a little bit different in the U S. We were really affected by these delta variant and the associated coverage of it and also coverage of what they thought was an inability to travel to Europe, so that affected us in North America.

Really in three ways in Q3, which is why revenues are lower than what we anticipated.

First is that we had a relatively.

Solid book of advertising agreements at the beginning of the third quarter in North America.

A lot of our advertiser promoting offers to Europe and then when the Delta coverage came in the media was talking about it might be difficult to get into Europe.

Response declined and.

Advertising decreased and some of the advertisers actually canceled.

At that time, so that was the first thing. The second thing is that we saw a voucher purchases for members and this was primarily in August and September.

When the Delta was in the news we saw these purchases a decrease in the third effect revenues. What steps are we also in order to be more cautious.

We decided in Q3 to increase the reserve that we have for vouchers that were previously sold and what potential future refunds could come in so all of that combined had quite a quite an impact on revenue was in North America as you see in Europe on the other hand, the press coverage was actually not that bad and Delta.

Early in the quarter actually even more towards Q2.

In our August and September there was a lot of confidence, particularly in the U K about the ability to travel again, so I would say well normally the North America U S and Canada, what would it be the head of Europe. This time in Q3 Europe was the head of North America.

Now in October most importantly, we see we see things are normalizing a.

As we said in the press release all of these effects are short term.

We had a good a better quarter in Q2, we had a more disappointing quarter in Q3.

But over the long run we expect that if travel recovers.

We will see an increase in revenue and cause what we clearly see is that our members. They are ready to travel they are eager to travel in depth, a little pent up demand, particularly for international travel.

Gotcha, and then in terms of just and general pricing trends you know obviously, we're seeing you know.

Significant inflationary pressures.

And I would assume that all of our senior notes and then of course labor shortages and so forth.

Two two.

Especially here in North America I was just wondering how does the inflationary pressures tend to affect you and how maybe advertisers as well as just the general population in terms of interest in traveling.

Prices for hotels in the U S domestically certainly they're very high in Q3 that under one hadn't made it a bit more difficult for us to source all first.

But on the other hand it off it meet our members look more for deal. So it's a it's sort of a.

Good thing and bad thing.

Since then prices have really come down I think that tool search of travel, particularly domestically we saw that not all in the U S. But we also saw it in Germany, we saw it in the U K.

That has a debt has gone down a little bit.

The bigger issue right now seem staff shorter chase rather than inflationary pressure.

Many of the hotels are not yet running at full occupancy.

But they are planning to return to that so that's that's where the biggest effect is in the travel industry with regards to hotels and airlines and for US as a media company. It means that it affects us in a way that.

Our debt.

Members are looking for four more all force that we provide them, but as I said earlier all of this is relatively short term, but the trend is clearly that in 2022, we all.

Spect that people will travel more and also that the imbalances in the labor market.

With.

But it does it will dissipate a little bit.

And in terms of.

North Europe kind of doing a little bit better.

You indicated that might've been driven largely by the U K.

U K is also a big contributor to Jack's flight club is it disappointing that Jack's flight club didn't perform better in the quarter and then maybe just give your general thoughts about how you still playing if you still plan to.

Spanned Jack's maybe even into North America, and what those the timeline for that might be.

First of all the positive trends in Europe continue at the beginning of Q4. So that's very good to see second regarding chicks flight club.

They're all source, particularly in the U K focus on international traveling.

Now that international travel.

It's something that our consumers and our members are looking for Oh.

This time it wasn't so much in 2021, but it's you know.

2022 seems to be the year, where international travel rebounds, a lot. That's why Jack's flight club with just hesitating to acquire a lot of new members, but.

That will probably change into next year.

And what are do you still have thoughts of expanding JAKKS to the United States or what or what are your thoughts on the timeline. There. Yes. We are doing this we are doing this right now and we just actually made an offer to the members in the U S. Petroleum checks like up we feel the timing is no better than it was three or six months ago.

Perfect Great. That's all I have thank you.

Sure you're welcome Michael.

Thank you. Our next question comes from Steve Silver with Argus Research. Your line is open.

Thank you very much and congratulations on the profitability in the quarter.

Just wanted to touch upon something that you mentioned in the management focus on the presentation.

Mentioning the focus on accelerating member growth in 2022, and I was just trying to get a little more color as to what plans there might be in place to do that whether you see its just mostly.

A byproduct of the pent up demand that you're seeing or maybe you just mentioned the plans to rollout Jack's flight club more on the U S. Just trying to get a sense as to your thinking in terms of the ways that you can accelerate member growth in 2022.

Actually all of the above Steve everything that you mentioned plus a few more things I cannot go too much into detail, but in general if you look back the last one and a half years.

Many people were not so eager to traveling now that is changing that has changed a lot and now we think it's a good environment.

For us to increase member growth.

Versus where we were in this year.

Okay, great and given.

Given the fact that our I guess, the Delta Varian put a wrinkle.

Wrinkle in the plan over Q3, and just trying to get a sense as to.

The lag that you might expect in terms of once the news, especially in North America becomes a little more favorable the lifting of restrictions and the like.

Where do you think that that might translate into that pent up demand.

Being converted back into both the travel.

And then in the revenue cycle back to travel to these things.

We already see clearly improvement in October actually in every market that we are in a we see that things are getting better or you will see that our days less coverage about COVID-19 at this time. So that's good and we're generally optimistic.

I'm hesitant to say what exactly is the timeline you know when we spoke to you three months ago.

Didn't expect how badly delta.

Hit you know not only us, but the economy in the U S. In Q3, even though what you expected at the time, but with just a little bit more cautious to give a timeline on where we will be each quarter over the next few quarters our power.

However, we are very optimistic because the trend in general is positive.

Yeah.

I understand okay, great. Thank you so much and congratulations again.

Steve.

Thank you. Our next question comes from Jim Goss with Barrington Research. Your line is open.

Thanks.

Okay I'd like to ask you about.

The.

Relationships, you've sent setup in Japan, and Australia, the royalty bearing licensing agreements Ah.

It seems to cover some of the territory you have sold off which is great.

The revenues licensing revenues you booked was a nominal amount $2000 I was just wondering if you could talk about.

How does that work.

We'll rollout and what the potential value as I know it says you booked it with a lag. So it may just be getting underway, but could you frame that for us.

Maybe Lisa you can comment on that but let me start off that I would see the situation in Asia right now is even far behind Europe and North America.

The countries.

Countries like China, Singapore, Thailand, Bali, Australia reacted much more strongly with regards to travel restrictions lockdowns and so forth.

So that's why the business there right now of the licensees is really very small.

That's why the revenues we are generating are insignificant, but he said you want to add anything here.

I can also add that Japan has been fairly solid, though they obviously with restrictions do not making as much money as he we would have expected, but they've been profitable and that's something that we're actually tracking and licensing on.

And that's why now we're getting some small amounts, but I would expect that Japan will probably increase in the future quarters, just because they made a profit during times of lockdown.

Okay.

And with Australian Bill you seem to say I would say in terms of the.

The development will be looked at.

One thing that I would also like to add Jim is that these are very important markets for us to source our deals. So for example, the licensee in Australia.

And for Southeast Asia is also providing all of our members in Europe, and North America with a.

Really quite fantastic deals to that region.

And that's where we also benefit just beyond the licensing piece, which right now as you said.

Rather small and not significant.

Actually just a cute another thought in my mind. If you do have some deals sourced in that area do you have the potential for book some what is for them local travel relatively speaking that might help buildup in anticipation of people from the U S and Europe trying to travel to those markets.

Yes, it goes exactly both ways.

But as I said, there's not much more restrictive Australia, New Zealand, Singapore, Thailand, China, Japan at all of these countries are still at this point of time very very isolated.

Okay.

<unk>.

You will also always a line.

Very nice key demographics.

For your client base I Wonder if there were any changes in any of those demographics since the pandemic took hold.

To the good or to the bad.

No significant changes in the profile across the markets.

I like to talk about that because I wanted to show with that travelers who members are not members who purchased deals because they don't have the money, it's actually quite the opposite.

They actually go on trips they have money to spend.

And.

Really using the travel deals as an excuse to say look this deal is so good I don't want to pass up on it. So let's go to the source, let's go towards China, Let's go to our friends or let's go to Mexico, because the deal is fantastic.

Most of the time with the office, what we see is that it's been.

With the offers that our advertisers are promoting told members, but also the all force that.

We show our members with these office normally we see that.

The majority of the members do not purchase the deal that we tell them about but something gets upgraded either a longer trip a bedroom. In fact, we just had an all four are two idea on where we are.

Launching pretty much and traveled through exclusive fly non stop flight from New York to Madeira and.

And what we know we're just sort of surprised like how many members actually purchased business class the business class deal rather than economy. So that's why I love to talk about the members. They are not people, who think they don't have the money and that's why they subscribe to us to actually have a lot of money and that's why to travel so much and that's why they love traveling.

Okay. Good point.

Finally, I was just wondering if you might comment on any shifts then voucher usage rates versus what you might have expected and what you might have booked in your revenues and how that is trending.

We generally see redemptions increase and we anticipate that that will continue into next few quarters, which is a good thing because ultimately when Keith vouchers to be used by a woman.

Okay.

That's it for now thank you.

Great. Thanks, Jim.

Thank you.

We have a question from Ed Woo with Affinia and capital your line is open.

Yeah. Thank you for taking my question have you noticed any shifts in terms of travel whether people are traveling beyond domestic locations are they going farther and particularly how is the international travelling doing right now.

Oh, Yes, we survey our members regularly about the.

Thoughts and behaviors and what.

I can see and I'm not sure. It's 2021 has been the year, where we saw a primarily domestic traveling now in 2022, we see a lot of.

The national travel plans clearly.

Our members are interested to leave the country, where they live.

And the other thing that's quite interesting is we see a much higher percentage of members who are open to the destination that they would travel to previously before the pandemic.

Memphis knew where they would want to go to now they're much more open and they.

They say look I'm I'm willing to go wherever it safe wherever it is good we are at the.

The good deals and offers are and that's really good for us and that's really interesting also for tourism boards because it allows them.

To really market deal.

Destination tool with us to an audience that is very open to coming to a country that they haven't been through it before.

And that's why actually our business with destination organizations tourism boards is.

It's doing quite well, particularly now at the end of the year and we see that trend also probably continuing 2022.

Great well, thanks for answering my questions and I wish you guys. Good luck you're welcome it.

Yeah.

Thank you and we have a follow up from Michael Pinsky with Noble capital. Your line is open.

Thank you one of the keys to the fact that you had profitability in the quarter was a lot of expense reductions in infrastructure infrastructure reductions. It was just wondering if you can if we have now cycled through all of those cost cuts are in this quarter or are there still further cost cuts that.

Youre anticipating as you go into this quarter and certainly into 2022.

Yeah, Michael Michael always one step to lost work [laughter]. Michael quick question. We saw we saw what we saw a bit of an increase from Q2 Q3 and expenses related to an upgrade in our I T.

Our infrastructure, we are now sending all emails from a from another third party previously with it all ourselves so that's impacting expenses a bit.

Temporarily I think.

This will probably go down as we are like we are in this transition phase.

We're very happy with this because we have seen much more robust delivery of emails we've seen greater open rates and we have seen a better click rates and this change was complete at knowing on markets at the beginning of the quarter.

But otherwise we said I mean, I think I've said it earlier in general we are expecting that our.

Expenses.

I mean, roughly at the level, where they are right now maybe they will go up because of course this business improve there will be a slight increase in hiring more people.

But we're not going to go back to the expense levels, where we were before the pandemic.

I would also I would also add that we may spend more in marketing.

But that's all for the benefit of the company.

Right right, Okay, great. Thank you so much.

Thank you and I'm showing no further questions at this time I'd like to turn the call back over to Mr. Hogan Bartel for closing remarks.

Great caffeine so.

Ladies and gentlemen, thank you so much for your time today again and your support.

And of course as always look forward to speaking with you again next quarter have a great day.

Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time have a nice day.

[music].

[music].

[music].

Hello, everyone welcome to the travel during the third quarter 2021 financial results Conference call. All participants have been placed in a listen only mode and the floor will be opened for questions. Following the presentation.

Today's call is being recorded the company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts constitute forward looking statements and are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of <unk>.

95 actual results could vary materially from those contained in the forward looking statements.

Cause that could cause actual results to differ materially from those in the forward looking statements are described in the company's Form 10-K, and 10-Q and other periodic filings with the S. E C.

As required by law the company undertakes no obligation to update publicly any forward looking statements whether as a result of new information future events or otherwise please refer to the company's website for important information, including the company's earnings press release issued earlier this morning.

An archive recording of this conference call will be made available on the travel do Investor Relations website at travel Zoo dotcom.

I R. Now, it's my pleasure to turn the floor over to travels as global CEO Hogarth Bartel and its chief Accounting Officer, Lisa Susie Lisa will start with an overview of the third quarter 2021 financial results.

Thank you operator.

And welcome to those of you joining us today.

Please open the management presentation to follow along with our prepared remarks.

The presentation in PDF format is available on our Investor Relations website.

At travel to Dot Com Slash I R.

Let's begin with slide number three.

Here you can see that our Q3 revenue was $15 7 million.

Up 14% from 13.8 million year over year.

Our operating loss in Q3 was 261000.

Due to our revenue would be negatively impacted by press coverage about the Delta variant in North America.

Okay.

We believe that this will be a short term effect as the news has become more positive in recent days worldwide, especially around travel restrictions being lifted for Europe and North America.

We had a slight decline in members from $31 3 million at the end of June down to $30 7 million at the end of September.

On slide four we go into more details about our two more significant business segments, North America and Europe.

Yeah.

We are showing the revenue and operating income for the last three years for Q3.

Yeah.

Both of these segments had significant revenue decline in 2020, but have now recovered.

In Q3 revenue from Europe grew faster.

This had a positive impact on Europe segment operating income.

Our North America business segment is at 63% the 2019 levels.

And the operating income is close to breakeven.

Our Europe business segment was slower to recover and is at 62% of 2019 revenues, but has closed the gap on the operating income.

Which now with 600000 is almost equal to 2019.

Yeah.

On slide five we provide information on non-GAAP operating profit as we believe it better explains how travel to evaluate performance.

This slide shows the non-GAAP operating profit, which is slightly lower at $1.1 million for Q3, 2021 compared to $1 2 million for Q3 'twenty 'twenty.

Slide six provides details on the items that are excluded in the calculation of non-GAAP operating profit.

Please turn to slide seven.

As of September 30, 2021 consolidated cash cash equivalents and restricted cash were $66 4 million.

The cash balance reached the expected level as more vouchers were used by travel to members and merchant payables decreased.

An additional factor was deposits related to the switch to a more efficient payment processor.

Slides eight and nine the detail our revenues by business segment.

When utilizing FX changes.

The North America business segment recorded an increase in revenue of 6%.

Year over year in the Europe business.

Segment recorded an increase in revenue of 37% year over year.

Yeah.

Compared to the prior year period, both revenue types travel and local have picked up as advertisers and partners have started coming back to make use of our beach.

On Slide 10, you can see that the quick adjustment of our cost structure right at the beginning of the pandemic in 2020.

Has resulted in an ongoing lower fixed costs and.

And improves the organization's efficiency.

As our operating expense consists of mostly fixed costs, we expect profits to increase if revenues continue to increase.

In summary, as you can see on slide 11, Q3 had lower revenues than anticipated due to the Delta variant in North America.

Europe's revenue trended positively.

However, due to lower fixed costs the company only recorded a small operating loss.

Looking ahead, we currently expect to achieve profitability in Q4.

We continue to see a trend of recovery of our revenue.

However, there could be unexpected fluctuations in the short term.

Now Holger will provide additional information and insights.

Thank you Lisa So, let's turn to slide 12, we have more than 30 million members $6 8 million mobile App users and 4 million social media followers.

So travelers who is loved by travel enthusiasts.

And even more our members the affluent.

And they are open to new experiences.

You see in the U S. 71% of members see that travel through influenza step travel destinations because they trust travelers who went that element of trust is really to us.

Slide 14 gives you an overview of what we are focused on.

We wanted to see if the exceptional opportunity for providing our 30 million members with exclusive and irresistible force in the area of travel entertainment and local offers and experiences.

We wanted to accelerate the growth of our member base in 2022.

And to grow check flight club profitable subscription revenue.

And we also want to grow profitability over the next year as demand for travel returns.

Back to the operator.

Thank you.

The floor is now open for questions. If you have a question. Please press the star followed by the one on your Touchtone telephone.

At this time once again, if you would like to ask a question ladies and gentlemen that is star followed by one on your Touchtone telephone. Please hold while we poll for questions.

Our first question comes from Michael Kaplinsky with Noble capital. Your line is open.

Thank you and thanks for taking my questions. I was wondering if you can give us a sense of how business trended in North America like throughout the quarter did you see.

Travel kind of started picking up towards the end of the quarter as the Delta variant kind of subsided in some markets or kind of give us a sense there and then in Europe.

Since it grew fast or what was the difference because there were still a lot of companies are countries that had no flight restrictions and so forth. So I'm just curious why Europe kind of saw a better growth rate than the North America.

Yes, Hi, Michael so.

In fact in Q3 the situation in North America, and Europe was a little bit different in the U S. We were really affected by the Delta variant and so.

So we see that coverage of it and also coverage of.

What they thought was an inability to travel to Europe, so that affected us in North America, but it really in three ways in Q3, which is why revenues are lower than what we anticipated.

The first is that we had a relatively.

Solid book.

Advertising agreements at the beginning.

The third quarter in North America.

But a lot of our advertiser promoting offers to Europe and then when the Delta coverage team in the media was talking about it might be difficult to get into Europe.

Respondents declined and.

Advertising decreased and some of the advertisers actually cancel the inclusions at that time. So that was the first thing. The second thing is that we saw a voucher purchases for members and this was primarily in August and September when the Delta variant was in the newest be saw these purchases a decrease and the third effect.

<unk> revenues was that we also in order to be more cautious.

Decided in Q3 to increase the reserve that we have for vouchers that were previously thought and what potential future refunds could come in so all of that combined had quite a quite an impact on revenues in North America as you see in Europe on the other hand.

The press coverage was actually not that bad and delta or early in the quarter actually even more towards Q2.

August and September there was a lot of confidence, particularly in the U K about the ability to travel again, so I would say, while normally than North America U S and Canada, what would it be the head of Europe. This time in Q3 Europe was the head of North America.

Now in October most importantly, we see we see things normalizing a.

As we said in the press release all of these effects are short term.

We had a good and better quarter in Q2 with a more disappointing quarter in Q3.

But over the long run we expect that if travel recovers.

We will see an increase in revenue and cause what we clearly see is that our members. They are ready to travel they are eager to travel and there's a lot of pent up demand, particularly for international travel.

Gotcha and then in terms of just in general pricing trends you know obviously, we're seeing.

Significant inflationary pressures.

I would assume that all are seeing that and then of course labor shortages and so forth.

Two.

Firstly here in North America I was just wondering how does the inflationary pressures tend to affect you.

And how maybe advertisers as well as just the general population in terms of interest in traveling.

Prices for hotels in the U S domestically certainly they're very high in Q3.

That under one hadn't made it a bit more difficult for us to source all force.

But on the other hand it also it made our members look more for a deal. So it's a it's sort of a.

Good thing and bad thing.

Since then prices have really come down I think that tool search of travel, particularly domestically we saw that not all in the U S. But we also saw it in Germany, we saw it in the U K.

That test.

Debt has gone down a little bit.

The bigger issue right now.

They're shorter chase rather than inflationary pressure.

Many of the hotels are not yet running at full occupancy.

But they are planning to return to that so that's that's where the biggest effect is in the travel industry with regards to hotels and airlines and for US. It's a media company. It means that it affects us in a way that.

Our debt.

Members are looking for four more all force that we provide them, but as I said earlier all of this is relatively short term, but the trend is clearly that in 2020 to.

We all expect that people will travelling more and also that the imbalances in the labor market.

Where we were.

It is it will dissipate a little bit.

And in terms of.

Europe kind of doing a little bit better.

You indicated that my might've been driven largely by the U K.

U K is also a big contributor to Jack's flight club is it disappointing that Jack's flight club didn't perform better in the quarter and then maybe just give your general thoughts about how you still playing if you still plan to expand Jack maybe even into North America and what those.

The timeline for that might be.

First of all the positive trends in Europe continue at the beginning of Q4. So that's very good to see second regarding chicks flight club.

Their office, particularly in our in the U K focus on international travel and now that international travel.

It's something that consumers and our members are looking for.

At this time it wasn't so much in 2021, but it's 2022 seems to be the year, where international travel rebounds a lot.

That's why Chegg flight club with just hesitating to acquire a lot of new members, but that that will probably change into next year.

And what are do you still have thoughts of expanding JAKKS to the United States or what or what are your thoughts on the timeline. There. Yes. We are doing this we are doing this right now and we just actually made an offer to the members in the U S to join checks like club, we feel the timing is no better than it was three or six months ago.

Perfect Great. That's all I have thank you sure you're welcome Michael.

Thank you. Our next question comes from Steve Silver with Argus Research. Your line is open.

Thank you very much and congratulations on the profitability in the quarter.

Just wanted to touch upon something that you mentioned in the management focus on the presentation.

Mentioning the focus on accelerating member growth in 2022, and I was just trying to get a little more color as to what plans there might be in place to do that whether you see its just mostly.

<unk> bye.

Byproduct of the pent up demand that you're seeing or maybe you just mentioned the plans to rollout Jack's flight club more than the U S. Just trying to get a sense as to your thinking in terms of the ways that you can accelerate member growth in 2022.

It's actually all of the above Steve everything that you mentioned plus a few more things I cannot go too much into detail, but in general if you look back the last one and a half years.

Many people were not so eager to travel and all that is changing that has changed a lot and now we think it's a good environment.

For us to increase member growth.

Versus where we were in this year.

Okay, great and.

Given the fact that the I guess the delta very input.

Hey, wrinkle in the plan over Q3, and just trying to get a sense as to.

The lag that you might expect in terms of once the news, especially in North America becomes a little more favorable the lifting of restrictions and the like.

Just.

Where do you think that that might translate into that pent up demand.

<unk> converted back into booked to travel.

And then in the revenue cycle back to travel these things.

We already see clearly improvement in October actually in every market that we are in a we see that things are getting better you will see that there is less coverage about COVID-19 at this time. So that's good and we are generally optimistic.

I'm hesitant to say what exactly is the timeline you know when we spoke to you three months ago.

We didn't expect how badly Delta would hit are you know not only us but the economy in the U S. In Q3, even though what you expected at the time.

A little bit more cautious to give a timeline on when.

We will be each quarter over the next few quarters.

However, we are very optimistic because the trend in general is positive.

Understand okay, great. Thank you so much and congratulations again.

Thanks, Steve.

Thank you. Our next question comes from Jim Goss with Barrington Research. Your line is open.

Thanks.

Hum.

Okay I'd like to ask you about.

The.

Relationships your sense setup in Japan, and Australia, the royalty bearing licensing agreements.

It seems to cover some of the territory you have sold off.

Which is great.

The revenues licensing revenues you booked was a nominal amount $2000 I was just wondering if you could talk about.

How that will roll out and what the potential value as I know it says you booked it with a lag. So it may just be getting underway, but could you frame that for us.

Maybe Lisa you can comment on that but let me start off that I would see the situation in Asia right now is even far behind Europe and North America.

Countries like China, Singapore, Thailand, Bali, Australia reacted much more strongly with regards to travel restrictions lockdowns and so forth.

So thats why the business there right now of the licensees is really very small and that's why the revenues. We are generating are insignificant, but he said you want to add anything here.

I can also add that Japan has been fairly solid though they you know obviously with restrictions do not making as much money as he literally expected, but they've been profitable and that's something that.

We're actually charging and licensing on.

And that's why now we're getting some small amounts, but I would expect that Japan will probably increase in the future quarters, just because they made a profit during times of lockdown.

Okay.

And with Australian built too soon to say I would say in terms of you know it's the development will be looked at.

One thing that I would also like to add Jim is that these are very important markets for us to source.

Deal. So for example, the licensee in Australia.

For Southeast Asia is also providing out of our members in Europe, and North America with.

Really quite fantastic deals to that region.

And that's where we also benefit just beyond the licensing fees, which right now as you said.

Rather small and not significant.

Actually just a cute another thought in my mind. If you do have some deals sourced in that area do you have the potential for book some what is for them local travel and relatively speaking that might help buildup in anticipation of people from the U S and Europe trying to travel to those markets.

Yes, it goes exactly both ways.

But as I said, they've got much more restrictive Australia, and New Zealand, Singapore, Thailand, China, Japan. All of these countries are still at this point of time very very isolated.

Okay.

You will also always a line.

Very nice key demographics.

For your client base I Wonder if there were any changes in any of those demographics since the pandemic took hold.

To the good or to the bad.

No significant changes in the profile across the markets.

I like to talk about that because I wanted to show with that travelers who members are not members who purchased deals because they don't have the money, it's actually quite the opposite.

They actually go on trips they have money to spend and.

They are really using the travel deals as an excuse to say look this deal is so good I don't want to pass up on it. So let's go to the Azores, Let's go towards China, Let's go to our friends or let's go to Mexico, because the deal is so fantastic in fact, most of the time with the office what we see is that in.

It's both with the offers that our advertisers are promoting told members, but also the offers that.

That we show our members with these office normally we see that.

The majority of the members do not purchase the deal that we tell them about but something gets upgraded either a longer trip a bedroom. In fact, we just had an offer to Marty era, where we are.

Launching pretty much and traveled through exclusive fly non stop flight from New York to Madeira.

And what we know with just what were surprised at how many members actually purchased business class the business last year, rather than economy. So that's why I love to talk about the members. They are not people, who you think they don't have the money and that's why they subscribe to us to actually have a lot of money and that's why to travel so much and that's why they love traveling.

Okay. Good point.

Finally, I was just wondering if you might comment on any shifts then voucher usage rates versus what you might have expected in an electric motor book, then your revenues and how that is trending.

We generally see redemptions increase and we anticipate that that will continue into next few quarters, which is a good thing because ultimately these vouchers to be used by our members.

Yeah.

Okay.

That's it for now thank you.

Great. Thanks, Jim.

Thank you.

We have a question from Ed Woo with <unk> capital Your line is open.

Yes. Thank you for taking my question have you noticed any shifts in terms of travel whether people are traveling beyond domestic locations are they going farther and particularly how is the international travelling doing right now.

Yes, we survey our members regularly about the.

Thoughts and behavior and what I can see in a nutshell 2021 has been the year, where we saw primarily domestic traveling now in 2022, we see a lot of.

International travel plans clearly.

Our members are.

Interested to leave the country, where they live.

And the other thing that's quite interesting is we see a much higher percentage of members who are open to the destination that they would travel to previously before the pandemic.

Memphis knew where they would want to go to now they're much more open and.

They say look I'm willing to go wherever it's safe wherever it's good we are at the.

The good deals and offers are and that's really good for us and that's really interesting also for tourism boards because it allows them.

To really market deal.

Destination tool with us to an audience that is very open to come into our country that they haven't been through before.

And that's why actually our business with destination organizations tourism boards.

It's doing quite well, particularly now at the end of the year and we see that trend also probably continue into 2022.

Great well, thanks for answering my questions and I wish you guys. Good luck you're welcome it.

Yeah.

Thank you and we have a follow up from Michael Pinsky with Noble capital. Your line is open.

Thank you one of the keys to the fact that you had profitability in the quarter was a lot of expense reductions and infrastructure infrastructure reductions. It was just wondering if you can if we have now cycled through all of those cost cuts are in this quarter or are there still further cost cuts that.

Youre anticipating as you go into this quarter and certainly into 2022.

Yeah, Michael Michael always one step last word [laughter] Michael Great question. We saw we saw we saw a bit of an increase from Q2 to Q3 and expenses related to an upgrade in our I T.

Our infrastructure, we are now sending all emails from a from another third party previously with it all ourselves so that's impacting expenses a bit.

Temporarily I think.

This will probably go down as we are like we are in this transition phase, but we're very happy with this because we have seen much more robust delivery of emails we've seen greater open rates and we have seen a better click rates and this change was complete at knowing our markets at the beginning of the quarter.

But otherwise we said I mean, I think I said it earlier in general we are expecting that our.

Ben says <unk>.

We remain roughly at the level, where they are right now maybe they will go up because of course this business improve there will be a slight increase in hiring more people.

But we're not going to go back to the expense levels, where we were before the pandemic.

I would also I would also add that we may spend more in marketing.

But that's all for the benefit of the company.

Right right, Okay, great. Thank you so much.

Yeah.

Thank you and I'm showing no further questions at this time I'd like to turn the call back over to Mr. Hogan Bartel for closing remarks.

Great Catherine so ladies and gentlemen, thank you so much for your time to dig in and your support.

And of course as always look forward to speaking with you again next quarter have a great day.

Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time have a nice day.